The Psychology of Blockchain

What makes blockchain a more secure system then our current systems? To understand this we must go back to what makes our current systems fail now.

There are three ways that our systems fail as they are. These reasons are fraud, collusion, and attack.

Fraud is when you cheat a system by either pretending to be someone else, or pretending to have more than you have. Think ponzi scheme, think credit fraud. You either steal someone’s identity and pretend to be them, or you are who you are but you mark up your balance sheets to make it look like you have more capital than you do.

Collusion is when you team up with different members of the network who hold power over the way it runs in order to cheat the system. Think family members who work in the legal system, or big businesses who donate money to political campaigns. When the people who handle the functioning of the system have power to override its rules, then they might commit collusion in order to help out a friend or family member.

Attack happens when an outside member of the system directly attacks the functionality of the system by overcoming its security barriers. Hackers fall into this domain. They are able to work their way through a system’s file system’s firewalls in order to control its operations. Think WannaCry or City of Atlanta. These ransomware attacks were all brought on by an outside member of the system who had the ability to directly attack the functionality of its gears.

So how does blockchain protect against these three ways that a system fails? Well, it takes into consideration that human nature cannot be relied upon to carry out a set of rules forcefully and truthfully one hundred percent of the time, and therefore a system needs to be set up that protects human nature from itself.

It does this by setting up a consensus mechanism, were multiple parties in the decentralized network have to agree upon a documented truth or action that was taken in the system before it is actually set into the system. It also does this by allowing the members of a system transparency into the happenings of its functionality, and therefore fraud and collusion are eradicated through it’s transparent lens.

Therefore, you pretend to be someone else because you aren’t even yourself in the system. You are a number, a public key cryptographic number, that references your account and the only way to access this account is to have the identification passwords security codes to access it. You also aren’t able to forge how much you have because this is documented in the immutable ledger and therefore the entire network can access your past transactional history at any moment.

The ability to collude is also taken away from people’s choices because there is no central power that is keeping the system alive. There are no bank tellers, management, or accountants that have the ability to over ride laws set in a system. The system runs on its own with the participation of the decentralized network, but it is not dependent upon certain people with designated power.

Lastly, an attack is less likely to happen with a blockchain because it is insanely costly and time consuming to break into the network. In order to break into the network and win 51% of the vote, which is required in order for you to make an attack on the ledger, you have to compete with not just one centralized power, but many power hubs. These power hubs invest lots of time and money into their hardware machines to ensure that they are performing at the highest level. Before, an attacker just had to wiggle past the defensive security line set up to protect the infrastructure, now they have to become invisible to the entire transparent network and outperform their capabilities. This is a huge disincentive for hackers to even try to attack a blockchain network.

Blockchains are able to be much more secure than systems that remain private and centralized due to the amount of disincentives set in place for an attempt to attack the system and the inability for network protectors to turn against their own system’s laws. The genius of a blockchain isn’t necessarily in the technological abilities it allows for, but in the way that it never allows it’s users to outsmart it. We finally have a system that can compete with the human brain, and one that can incentive us to join together rather than become competitive and separate.